Caution when buying property: the tax tip

E.Income from renting a property can be reduced by the advertising costs. This also includes financing costs (interest) and depreciation. In the case of residential buildings, unless a shorter useful life can be proven, the legislator assumes a useful life of 50 years, so that depreciation amounts to two percent of the building price per year. Land cannot be written off. When buying a property, it is therefore important how the acquisition costs are distributed between the building and the land. There is often a dispute between the tax authorities and the taxpayer about this. That is why the financial administration has developed a working aid with which you can carry out a purchase price allocation yourself or check the plausibility of an existing purchase price allocation.

However, the Federal Fiscal Court decided in its judgment of July 21, 2020 (IX R 26/19) that this working aid is unsuitable as a distribution key. It does not guarantee a breakdown according to the real market values, since the methods of the comparative and discounted earnings method are not taken into account. In addition, the local conditions are not taken into account. Therefore, real estate buyers should obtain an appraisal of the apportionment scale from a publicly appointed and sworn real estate appraiser before purchasing. If the report is appropriate, it should also be accepted by the tax office. However, the office is not bound by the expert opinion; it can prepare its own valuation report. In the event of deviations, a tax court must decide.


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